SARB stays put again in March

At its 27 March meeting, the Monetary Policy Committee of the South African Reserve Bank (SARB) held fire, leaving the repurchase rate at a 15-year high of 8.25% for the fifth consecutive meeting. The decision was unanimous and had been anticipated by markets.

The SARB’s hold was driven by a slow return of inflation to the mid-point of the Bank’s 3.0–6.0% target band; both headline and core inflation edged up in February, with the former moving close to the upper bound of the range. Moreover, the Bank noted that risks to the inflationary outlook are skewed to the upside. The SARB upwardly revised its 2024 headline and core inflation forecasts to 5.1% and 4.8%, respectively, while it kept the metrics for 2025 and 2026 unchanged. Despite the upward revisions, all six forecasts lie within the Bank’s target band. That said, the SARB now sees inflation returning to 4.5% in Q4 2025—later than in its January forecast. Consequently, the Bank delayed the beginning of the normalization of the policy rate. Regarding activity, the SARB left its GDP growth forecasts for 2024 and 2026 unchanged, while it increased its 2025 forecast to 1.4%.

The SARB’s communiqué did not offer explicit forward guidance, but it reiterated, “decisions will continue to be data dependent, and sensitive to the balance of risks to the outlook”. The majority of our panelists have penciled in the first cut in Q3. The next meeting is scheduled for 30 May.

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